We all recognize that the practice of law has become more national in scope; for some firms, it’s even international. With technology and the increasing mobility of both clients and lawyers, geographic boundaries do not keep all lawyers, or clients, in one state. That has been true for a long time now.
The rules in almost all states allow lawyers to at least temporarily represent clients in that state even if the lawyer is not licensed to practice law there. Attorney David Russell of Hale, Skemp, Hanson, Skemp & Sleik, La Crosse, points out, “I think it is becoming more common due to the ease of finding the law in other states, and electronic filing. But you have to make sure your client knows that you are not licensed there, and you may need local counsel.”
All that mobility and “globalization” in the business world and other facets of our lives can sometimes cause problems for lawyers. In fact, lawyers may feel pressured to expand their practices outside of the state or in areas of law outside of their comfort zone to remain competitive. Representing clients in need is what being a lawyer is all about, right?
But Brian Anderson, claims counsel at Wisconsin Lawyers Mutual Insurance Co. (WILMIC), says the number of out-of-state claims has increased in recent years, in part because lawyers are taking on this work more frequently. “Looking back at claims from 1994 to 2010, out-of-state claims were pretty infrequent – less than 2 percent of all our claims. Since 2010, however, that percentage has more than doubled. While they are still a small fraction of our total claims, they now account for about 4 percent of our claims.”
What are the riskiest states for Wisconsin lawyers to work in? Anderson says, “Florida has been the source of more than one-third of all our out-of-state claims during the past five years. Estate planning work has been part of the mix, but other areas of law have also produced some claims. It probably has more to do with Wisconsin clients traveling to Florida or retiring there. Another warm-climate state, California, has produced some of our out-of-state claims as well. I would simply caution Wisconsin attorneys that if they are taking on some work in those states, be very careful.”
Other states that have tripped up WILMIC policyholders historically, according to Anderson, are closer to home. “Illinois, Minnesota, and Iowa account for most of the rest of our out-of-state claims.”
Anderson says before committing to representing a client, you should ask yourself if you are best suited to handle the case. “Consider limiting your practice to states where you are admitted to practice.” For example, a couple who has a car accident in another state might ask their Wisconsin lawyer to represent them in connection with their personal injury claims. Anderson says, “If you decide to handle a client matter outside of your jurisdiction, it is wise to associate with local counsel in the state where the accident arose from the outset, to avoid encountering problems down the line.”
For many law firms, referrals are an important part of building and maintaining a strong practice. It is common practice for lawyers to refer clients to other attorneys who may be better suited to handle the case geographically. Some lawyers, however, have learned the hard way that the act of merely “referring” a case and agreeing to accept a fee for doing so can be enough for the referring attorney to be held responsible for the mishandling of the case. The referring lawyer can be the direct target of the malpractice claim.
This can be especially troublesome when referring the case to a lawyer in another state. Anderson says, “You have to keep in mind that if you refer your client’s case to another attorney or law firm for handling and you maintain a fee interest in that case, you can be held responsible for the mishandling of that case.” He cites SCR 20:1.5(e), which states that each lawyer in a referral case assumes the same ethical responsibility for the representation as if the lawyers were partners in the same firm.
In addition, Anderson says, “Your potential risk when you expect to be paid for an out-of-state referral includes being named in a lawsuit and dragged into court in the state where the accident occurred. This can be expensive, time consuming, and very disruptive to your Wisconsin practice.”
Some states have reciprocity rules that work well with Wisconsin’s ethics rules. Others, however, are not so friendly to Wisconsin lawyers. Anderson says, “In Florida, for example, they seem to work very hard at excluding out-of-state lawyers from doing legal work there. Lawyers practicing in the areas of contract law, corporation formations, real estate, and estate planning need to be especially wary of the rules in states like that.”
Anderson adds that despite the temptation, it sometimes makes the most sense for a firm, when referring a case to a law firm out of state, to give up fee sharing. You may lose out on some revenue, but you also avoid liability if the out-of-state firm mishandles the case.
“While referrals can be lucrative, they also pose certain risks if not done properly. Simply referring the case and leaving it to the firm to which you referred it isn’t enough – especially when you are talking about an out-of-state case. You may be doing a disservice to the client and placing your firm at risk of a claim. Since you will be held responsible for the manner in which the case is handled, it would be prudent to stay involved to make sure the client is receiving diligent representation.”
Careless selection of clients can blow up on you. If you are unfamiliar with the other state’s laws and procedural rules, it may be a good idea to decline the case. Too often, lawyers take a case before they know all the facts or have elicited all necessary information from the client.
Minocqua attorney John Danner says his advice to lawyers is to pay attention to the details and the state with which you are dealing. “Number one, be careful of the rules of procedure in that state. You may not know them very well and that can make a big difference in how effectively, or ineffectively, you represent the client. Electronic filing rules may be different. Local court rules can be different. Just as local rules can be different in Milwaukee for a Minocqua lawyer like me, they are likely to be just as different or more so if I were taking a case in Iowa.”
“Number two, you have to understand the different personalities of the lawyers involved in the case. That’s true no matter where you are handling a matter, but you are likely even more unfamiliar with lawyers in another state with whom you have never worked before.”
Danner says that years ago, he agreed to handle a divorce matter for an old friend in another state but told her that he would help her only if the case eventually settled. If not, he would refer her to a lawyer in that state who could litigate the case for her. “I was not familiar enough with that state to be comfortable taking the case to trial.”
Jumping into a case without all the facts is a mistake and can be costly. And part of knowing the facts of the case is understanding the jurisdiction in which the matter resides. “Always do the research first and take the case second,” says Anderson.
Sometimes it makes sense for a lawyer to go through a checklist of sorts before committing to representing a client in another state. Russell says he considers a set of questions and risks before taking on an out-of-state client. “Can I legally and ethically represent someone in a state where I am not licensed? Should I have co-counsel in that state? After explaining these issues to the client, is my representation still desired?”
Russell also says a lawyer should check the other state’s specific laws. “What is the statute of limitation? What are the pro hac vice requirements? In a bankruptcy or financial distress situation, what are the exemptions allowed? Is state law or federal law involved? I am comfortable handling Social Security Disability hearings in other states, because it is the same stuff around the country, although I try to call an attorney in the other jurisdiction to ask about the preferences of the judges.”
Russell says, “I once helped a Wisconsin resident with a deed in lieu of foreclosure for a property in another state, by checking the applicable statutes and having opposing counsel draft the documents, which I reviewed and asked for modifications. And I did not have to appear in court in the other state. I stopped doing bankruptcy cases in Minnesota even though it’s federal law because it was an entirely different process and approach by trustees and judges.”
Clients today, like people in general, are more mobile, traveling and transacting business without regard to geographic boundaries. Some lawyers may feel the need to expand beyond their state’s borders to meet their clients’ needs. The risks that come with that are lack of knowing another state’s procedures and laws, getting outside the lawyer’s own comfort zone, and not understanding the jurisdiction in which the case resides.
Just because you can do something doesn’t mean you always should. Use caution! And as Russell says, “I think it may be getting easier for attorneys to expand practice geographically, but they must do it right and ethically.”